Official data released on Friday confirms the UK is now out of recession after the UK economy grew 0.6% in the first quarter of 2024.
“This morning’s UK GDP figures confirm, as expected, that the economy has now exited the shallow recession into which it fell in late-2023, having chalked up growth of 0.6% QoQ in the first three months of the year, considerably above consensus of an 0.4% pace of quarterly growth,” said Michael Brown Senior Research Strategist at Pepperstone.
Although some may be happy to see growth come in better than expected at 0.6%, this is still a slow rate of growth. The UK Prime Minister may well claim credit for returning the UK to growth, but a 0.6% increase in GDP is nothing to be proud of, given the US grew 1.6% in the same period.
“After a challenging period positive numbers highlight that the economy is moving in the right direction. Afterall, even sluggish growth is better than no growth at all,” said Scott Gardner, investment strategist at Nutmeg.
“Combined with the expectation that when the latest inflation data is released at the end of the month there will be a further fall, policymakers will feel that the UK has navigated a difficult economic storm with minimal damage to the economy.”
A string of recent economic data points suggests the UK economy has built a base for growth, with a manufacturing sector slowly catching up with a robust service sector. That said, the quality of additional growth will likely be reliant on policy decisions and a reduction in borrowing costs.
“Leading indicators, such as the most recent round of PMI surveys, point to this relatively solid momentum having continued early in the second quarter, particularly in the all-important services sector,” Michael Brown said.
“Maintaining this momentum, however, will likely require services output to remain resilient, along with consumer spending continuing to pick-up. A looser policy stance will, naturally, aid with this.”
